The Eurocan paper mill in Kitimat will close permanently as of January 31, 2010, parent company West Fraser announced today.

After many years of ongoing efforts to reduce operating costs and improve results, the company announced last week that it will permanently close the unprofitable operation.

“We deeply regret the impact the mill closure will have on our 535 employees, their families and the community and we will ensure those who are affected are treated with fairness and respect,” said Hank Ketcham, West Fraser’s Chairman, President and CEO in a media release.

The 40-year-old mill, which produces linerboard and kraft paper, has historically struggled with high costs and negative returns. A contributing factor to the mill’s problems in recent years has been sawmill curtailments in the region, which have reduced the supply of lower-cost residual wood chips to Eurocan and increased the mill’s reliance on more expensive whole log chips.

In addition to these ongoing challenges, the mill’s situation took a dramatic negative turn during the past year. Since December of 2008, Eurocan has experienced a drop of approximately 40 per cent in the net selling price of its products.

This decline has been driven by the global economic slowdown, the rise of the Canadian dollar and severe competition from low-cost paper producers in other countries.

“A deep and thorough review by the company looked at ways to offset the steep decline in Eurocan’s financial results,” said Ketcham. “Unfortunately, even with the most optimistic projections the business fundamentals of the operation have deteriorated to the point where permanent closure is the only reasonable alternative.”

Both Houston Forest Products and Pacific Inland Resources in Smithers, West Fraser mills, had contracts to ship their residual chips to Eurocan and with the announced closure different arrangements are being made for that product, Eurocan Pulp and Paper mill manager Dennis Clare said.

“We will not be needing those chips... in the future, so other arrangements are being made,” Clare said.

There is the possibility that the chips could be shipped to mills in the Prince George or Quesnel operations, he said. At this time it’s unknown how the truckers that shipped the product would be affected, or if they’d simply be redirected, he added.

Currently Eurocan is focussing its efforts on working with its employee assistance programs for the direct layoffs expected with the closure and trying to help those employees through the tough transition. Other West Fraser mills throughout the northwest should not feel the effects of the closure of Eurocan, Clare said.

“The impact of the Eurocan Pulp and Paper closure has no effect on the other sawmill operations within West Fraser,” Clare said.

Stikine-Bulkley Valley MP Nathan Cullen said that he has already spoken with the Minister of Natural Resources in Ottowa to see what kind of help can be sought to offset some of the job losses.

“We’re looking across the province and country right not to see what’s happened in other communities when they’ve lost a major mill,” Cullen said, who plans plans to meet in Kitimat next week with the community and Eurocan..